JEFFERIES REPORTS FISCAL FIRST QUARTER 2017 FINANCIAL RESULTS

Transcription

1 JEFFERIES REPORTS FISCAL FIRST QUARTER 2017 FINANCIAL RESULTS NEW YORK March 21, Jefferies Group LLC today announced financial results for its fiscal first quarter Highlights for the three months ended February 28, 2017: Total Net Revenues of $796 million Investment Banking Net Revenues of $408 million Total Equities and Fixed Income Net Revenues of $379 million Earnings Before Income Taxes of $124 million Net Earnings of $114 million Rich Handler, Chairman and Chief Executive Officer, and Brian Friedman, Chairman of the Executive Committee, commented: "Our first quarter represents the fourth consecutive quarter of improving results. Net revenues, for the last 12 months through February 2017, aggregate to nearly $3 billion and reflect the benchmark level of the firm's capabilities during a stable environment. Our first quarter performance was driven by well-balanced contributions of $408 million from Investment Banking and $379 million from Equities and Fixed Income. Our Investment Banking results reflect an improved Debt Capital markets performance, a solid contribution by Equity Capital Markets and another good quarter for our Advisory activities. The sales and trading environment was reasonably robust for much of the quarter. Fixed Income revenues were $222 million, an increase of 48% versus the fourth quarter of last year and nearly four times greater than the revenues of last year s challenging first quarter. Equities revenues were a solid $157 million. The tax rate for the quarter was 8% and reflects a $32 million, or 26%, net tax benefit which resulted from the repatriation of earnings, along with their associated foreign tax credits, from certain foreign subsidiaries." The attached financial tables should be read in conjunction with our Annual Report on Form 10-K for the year ended November 30, Amounts herein pertaining to February 28, 2017 represent a preliminary estimate as of the date of this earnings release and may be revised in our Quarterly Report on Form 10-Q for the quarter ended February 28, This release contains "forward-looking statements" within the meaning of the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of Forward-looking statements include statements about our future results and performance, including our future market share and expected financial results. It is possible that the actual results may differ materially from the anticipated results indicated in these forward-looking statements. Please refer to our most recent Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from those projected in these forward-looking statements. Jefferies, a global, full-service investment banking firm focused on serving clients for over 50 years, is a leader in providing insight, expertise and execution to investors, companies and governments. Our firm provides a full range of investment banking, sales, trading, research and strategy across the spectrum of equities, fixed income and foreign exchange, as well as wealth management, in the Americas, Europe and Asia. Jefferies Group LLC is a wholly-owned subsidiary of Leucadia National Corporation (NYSE: LUK), a diversified holding company. For further information, please contact: Peregrine C. Broadbent Chief Financial Officer Jefferies Group LLC Tel. (212)

2 CONSOLIDATED STATEMENTS OF EARNINGS (Amounts in Thousands) Revenues: Commissions and other fees $ 145,822 $ 157,549 $ 155,824 Principal transactions 220, ,362 (103,373) Investment banking 408, , ,930 Asset management fees and investment income from managed funds 8,926 1,319 9,530 Interest 202, , ,945 Other 24,048 26,661 (21,751) Total revenues 1,009, , ,105 Interest expense 214, , ,118 Net revenues 795, , ,987 Non-interest expenses: Compensation and benefits 460, , ,743 Non-compensation expenses: Floor brokerage and clearing fees 45,858 42,946 40,479 Technology and communications 65,507 66,396 64,989 Occupancy and equipment rental 25,815 26,635 24,585 Business development 22,632 25,405 24,854 Professional services 32,124 29,763 23,512 Other 19,206 26,644 20,701 Total non-compensation expenses 211, , ,120 Total non-interest expenses 671, , ,863 Earnings (loss) before income taxes 124,199 96,529 (249,876) Income tax expense (benefit) 10,179 9,454 (83,107) Net earnings (loss) 114,020 87,075 (166,769) Net earnings (loss) attributable to noncontrolling interests 1 (105) 44 Net earnings (loss) attributable to Jefferies Group LLC $ 114,019 $ 87,180 $ (166,813) Pretax operating margin 15.6% 13.0% (83.6)% Effective tax rate (1) 8.2% 9.8% 33.3 % (1) The effective tax rate for the three months ended February 28, 2017 reflects a $32 million, or 26%, net tax benefit, which resulted from the repatriation of earnings, along with their associated foreign tax credits, from certain foreign subsidiaries. The effective tax rate for the three months ended November 30, 2016 was impacted by revisions to previously forecasted results during the year ended November 30,

3 SELECTED STATISTICAL INFORMATION (Amounts in Thousands, Except Other Data) Revenues by Source Equities $ 156,714 $ 175,960 $ 1,745 Fixed income 221, ,423 56,782 Total Equities and Fixed income 378, ,383 58,527 Equity 61,566 62,085 43,999 Debt 162, ,706 57,273 Capital markets 224, , ,272 Advisory 183, , ,658 Total Investment banking 408, , ,930 Asset management fees and investment income (loss) from managed funds: Asset management fees 7, ,205 Investment income (loss) from managed funds (1,675) Total 8,926 1,319 9,530 Net revenues $ 795,513 $ 741,769 $ 298,987 Other Data Number of trading days Number of trading loss days Number of trading loss days, excluding KCG Average firmwide VaR (in millions) (1) $ $ 8.46 $ 8.37 Average firmwide VaR, excluding KCG (in millions) (1) $ 8.26 $ 5.93 $ 6.69 (1) VaR estimates the potential loss in value of our trading positions due to adverse market movements over a one-day time horizon with a 95% confidence level. For a further discussion of the calculation of VaR, see "Value-at-Risk" in Part II, Item 7 "Management's Discussion and Analysis" in our Annual Report on Form 10-K for the year ended November 30,

4 FINANCIAL HIGHLIGHTS (Amounts in Millions, Except Where Noted) Financial position: Total assets (1) $ 37,703 $ 36,941 $ 35,193 Average total assets for the period (1) $ 44,490 $ 43,412 $ 44,669 Average total assets less goodwill and intangible assets for the period (1) $ 42,644 $ 41,560 $ 42,796 Cash and cash equivalents (1) $ 4,080 $ 3,529 $ 2,600 Cash and cash equivalents and other sources of liquidity (1) (2) $ 5,886 $ 5,303 $ 4,085 Cash and cash equivalents and other sources of liquidity - % total assets (1) (2) 15.6% 14.4% 11.6% Cash and cash equivalents and other sources of liquidity - % total assets less goodwill and intangible assets (1) (2) 16.4% 15.1% 12.3% Financial instruments owned (1) $ 13,253 $ 13,810 $ 13,630 Goodwill and intangible assets (1) $ 1,843 $ 1,847 $ 1,869 Total equity (including noncontrolling interests) $ 5,472 $ 5,371 $ 5,262 Total member's equity $ 5,472 $ 5,370 $ 5,261 Tangible member's equity (3) $ 3,629 $ 3,523 $ 3,392 Level 3 financial instruments: Level 3 financial instruments owned (1) (4) $ 365 $ 413 $ 489 Level 3 financial instruments owned - % total assets (1) 1.0% 1.1% 1.4% Level 3 financial instruments owned - % total financial instruments (1) 2.8% 3.0% 3.6% Level 3 financial instruments owned - % tangible member's equity (1) 10.1% 11.7% 14.4% Other data and financial ratios: Total long-term capital (1) (5) $ 11,388 $ 10,501 $ 10,588 Leverage ratio (1) (6) Adjusted leverage ratio (1) (7) Tangible gross leverage ratio (1) (8) Number of trading days Number of trading loss days Number of trading loss days, excluding KCG Average firmwide VaR (9) $ $ 8.46 $ 8.37 Average firmwide VaR, excluding KCG (9) $ 8.26 $ 5.93 $ 6.69 Number of employees, at period end 3,319 3,329 3,439 4

5 FINANCIAL HIGHLIGHTS - FOOTNOTES (1) Amounts pertaining to February 28, 2017 represent a preliminary estimate as of the date of this earnings release and may be revised in our Quarterly Report on Form 10-Q for the three months ended February 28, (2) At February 28, 2017, other sources of liquidity include high quality sovereign government securities and reverse repurchase agreements collateralized by U.S. government securities and other high quality sovereign government securities of $1,308 million, in aggregate, and $498 million, being the total of the estimated amount of additional secured financing that could be reasonably expected to be obtained from our financial instruments that are currently not pledged at reasonable financing haircuts. The corresponding amounts included in other sources of liquidity at November 30, 2016 were $1,455 million and $319 million, respectively, and at February 29, 2016, were $1,061 million and $424 million, respectively. The amounts included in other sources of liquidity at February 29, 2016 have been reduced by $205 million from what was previously disclosed to reflect adjustments for certain securities that have subsequently been identified to have been encumbered. (3) Tangible member's equity (a non-gaap financial measure) represents total member's equity less goodwill and identifiable intangible assets. We believe that tangible member's equity is meaningful for valuation purposes, as financial companies are often measured as a multiple of tangible member's equity, making these ratios meaningful for investors. (4) Level 3 financial instruments represent those financial instruments classified as such under Accounting Standards Codification 820, accounted for at fair value and included within Financial instruments owned. (5) At February 28, 2017, November 30, 2016 and February 29, 2016, total long-term capital includes our long-term debt of $5,915 million, $5,131 million and $5,326 million, respectively, and total equity. Long-term debt included in total long-term capital is reduced by the amount of debt maturing in less than one year, where applicable. (6) Leverage ratio equals total assets divided by total equity. (7) Adjusted leverage ratio (a non-gaap financial measure) equals adjusted assets divided by tangible total equity, being total equity less goodwill and identifiable intangible assets. Adjusted assets (a non-gaap financial measure) equals total assets less securities borrowed, securities purchased under agreements to resell, cash and securities segregated, goodwill and identifiable intangibles plus financial instruments sold, not yet purchased (net of derivative liabilities). At February 28, 2017, November 30, 2016 and February 29, 2016, adjusted assets were $32,155 million, $30,352 million and $28,920 million, respectively. We believe that adjusted assets is a meaningful measure as it excludes certain assets that are considered of lower risk as they are generally self-financed by customer liabilities through our securities lending activities. (8) Tangible gross leverage ratio (a non-gaap financial measure) equals total assets less goodwill and identifiable intangible assets divided by tangible member's equity. The tangible gross leverage ratio is used by rating agencies in assessing our leverage ratio. (9) VaR estimates the potential loss in value of our trading positions due to adverse market movements over a one-day time horizon with a 95% confidence level. For a further discussion of the calculation of VaR, see "Value-at-Risk" in Part II, Item 7 "Management's Discussion and Analysis" in our Annual Report on Form 10-K for the year ended November 30,